How to Evaluate Financial Aid Award Letters with Missing Tuition and Grant Information

We have a dilemma here. My son has been accepted by five colleges:
four public colleges and one private college. The private school is the only
one that is showing us the “sticker price.” The rest, while they have
sent aid packages, are not firm on what their fees are for the
upcoming fall semester or academic year. The deadline to accept the
offer of admission is May 1. How do we make a decision when we don’t
know what the sticker price is? Why isn’t there more outrage about
this? How do we compare and decide if we don’t know what the total
cost is?
— Diane B.

There hasn’t been a legal requirement for a financial aid award letter
since 1988, so there aren’t any standards concerning what information
should be included in a financial aid award letter or how the
information should be presented.

About one third of colleges do not list the cost of attendance on the
financial aid award letter. The cost of attendance includes tuition
and required fees, room and board, textbooks, supplies, transportation
and personal expenses. It may also include the cost of a computer and
dependent care. Of the colleges that do provide the cost of attendance
information on the financial aid award letter, less than half provide
complete information or a breakdown of the costs.

Some colleges do not include the cost of attendance information on the
financial aid award letter because of concern about sticker shock.
Some families will turn down a college’s offer of admission because of
a high sticker price, even if the net price after subtracting grants
and other gift aid is much lower. Others list only the direct costs,
such as tuition and fees, for similar reasons.

If it were just a matter of the costs being omitted from the financial
aid award letter, you could look for the costs on the college’s web
site or in the college’s course catalog. You could also get the
previous year’s cost information from the US Department of Education’s
College Navigator web site.

However, this year there is a lot more uncertainty about public
college tuition rates. Most colleges set fall tuition in early spring,
shortly before the financial aid office assembles the financial aid
package. But this year several governors have proposed severe cuts in
state appropriations to the public colleges. If these cuts are
enacted, the public colleges will be forced to increase tuition at
double-digit rates.

State income tax revenues are down because of the recession. This
forces governors and the state legislature to cut the state budget,
since state governments are required to have balanced budgets. (Very
few states have rainy day funds to smooth out year-by-year volatility
in state income tax revenues.) One of the first places they cut is
support of higher education. This forces the public colleges to
increase tuition rates, since tuition is one of the few discretionary
sources of revenue available to the colleges. Cuts in state support
are strongly correlated with increases in public college tuition. As a
result, public college tuition often goes through feast/famine cycles.
The difference this time around is the 2009 stimulus bill delayed the
increases in most states by two years.

Public college tuition inflation will be significantly above average
this year in many states. Pennsylvania’s governor has proposed a 54%
cut in funding for the state’s 4-year public colleges and a 1% cut in
funding for the state’s community colleges. Arizona’s governor has
proposed cutting funding for the state’s 4-year public colleges by 20%
and for the state’s community colleges by 50%. Texas has proposed cuts
of about 40%. Ohio’s governor has proposed a 13% cut in state
appropriations to public colleges. California’s governor has proposed
an 18% cut in funding for the state’s 4-year colleges and a 6.5% cut
in funding for the state’s community colleges. Tennessee’s government
has proposed a 2% cut in state appropriations to public colleges.

The impact of these cuts on public college tuition inflation will vary
according to how much of the college’s budget comes from state
appropriations and how much from tuition. Even a small cut in state
appropriations in some states can lead to double-digit tuition
inflation. For example, the 2% cut in state appropriations in
Tennessee will result in a 14% increase in tuition at Tennessee 4-year
public colleges and a 10% increase in tuition at Tennessee community
colleges. Pennsylvania’s proposed funding cuts may lead to public
college tuition inflation that rivals last year’s record 32% increase
in public college tuition in California.